Political uncertainties amid rising discontent

May 02 2012

Felix Goryunov

Drawing by Niyaz Karim

The protest movement in Russia may not be finished, but it also may not bring about the creation of democratic capitalism.

Former Finance Minister Alexei
Kudrin believes that another economic crisis could bring about political change
in Russia.
He said so recently, speculating at the same time that the protest movement in
the country had actually not died out at all, and that the masses will take to
the streets again if the elite and the government do not offer a coherent
economic policy that society can get behind.

Kudrin, a prominent member of
the country’s establishment, has created a Committee of Civic Initiatives
designed to consolidate political movements of all kinds and “openly oppose
actions of the ruling regime notwithstanding personalities and posts.” In
addition to Kudrin, the committee includes such men Igor Yurgens, a deputy
chairman of the Russian Union of Industrialists and Entrepreneurs, nicknamed
the Club of Oligarchs; Yevgeny Gontmakher, head of the Center of Social
Policies under the Institute of Economy; and Nikita Belykh, governor of the
Kirov Region.

Kudrin’s identification with
the opposition is just another sign of the divide in the Russian elite that was
non-existent during the first reshuffle in the Putin-Medvedev ruling tandem in
2008. Riding high on a wave of seemingly stable economic growth driven by high
oil prices, the Russian elite rallied around the powers-to-be even though it
was clear even then that reliance on exports of natural resources would ensure
neither sustainable economic development nor liberalization of the regime. The
small opposition parties not represented in the Duma did not question the
mainstream neoliberal economic policies either. Their liberal members – small
groups of Yeltsin-era politicians and human rights activists – mainly protested
from time to time against abuses of administrative power and corrupt police.
This created an impression in the West that since opposition members were not
jailed for years but were allowed to organize protest rallies, Russia
could formally be considered a democracy.

The rally was supported by Mikhail
Prokhorov, an ambitious oligarch who later ran for president. After he won 5.7
million votes, Prokhorov and his party became a noticeable political force opposing
the Putin regime. The law on political parties recently adopted by the Duma and
signed by outgoing president Medvedev will undoubtedly open doors to new
political groups, Prokhorov’s among them, that purport to defend the interests
of the general public and business communities on federal and regional levels.

Among such amalgamations,
Right Turn, a political movement that will eventually become a party organized
by the business association Delovaya Rossia (Business Russia), deserves special
attention. The association unites entrepreneurs from 68 Russian regions who
belong to 40 industrial business associations. In contrast to big corporations
profiting from resource exports, members of Delovaya Rossia are oriented towards
the domestic market and are professionally developing their businesses despite the
unfavorable economic environment. Delovaya Rossia’s chairman Boris Titov
believes that Russia
needs democracy, but that it will come only when the now-forming middle class can
make the authorities listen to its demands. The group’s liberal ideology, Titov
says, already attracts many prominent business people and politicians, including
those who are members of the ruling United Russia party.

Two centuries ago, classic
political economic demonstrated that the structures of a nation-state are
formed by and are fully dependent on the nation’s economic base – the form of
ownership of the means of production and wealth creation. Russia now is
undoubtedly a capitalist country and its institutional structures serve the
interest of the capitalist class, notwithstanding Vladimir Putin’s claims that
as the leader of the All-Russia Popular Front he will be “president of all the
Russians.”

But Putin and his men have created
a system of state-oligarchy capitalism that is in conflict with economic,
social and political needs of the actual fast-developing Russian capitalism and
the Russian business community at large has now a lot to fight for. A decade
ago, Russian entrepreneurs owned at best medium-size businesses. A small number
of big businesses belonged to newly rich and unscrupulous bankers and
businessmen who befriended bureaucrats during the Yeltsin era and as a result
of these connections privatized the most lucrative chunks of public property,
particularly the extracting industries. Now, after over a decade of relatively
fast growth, when the capitalization of the Russian economy increased from $250
billion to $1.25 trillion, the political clout of these Kremlin-friendly
oligarchs who dictate national economic policies has become the main obstacle
to diversified and innovative development of the Russian economy. The aspiring
capitalist class is beginning to realize that not only their businesses, but
the country’s economy and social life are desperate for transformation into a
system of democratic capitalism. Hence, the entrepreneurs’ rising support for
political and institutional changes to upgrade Russia’s superstructure and
coherently address domestic and international challenges.

While private ownership in Russia
is not challenged even by the Communists, other basics of capitalism need
radical improvement. Among these basic needs are fair competition unhampered by
corrupt bureaucracy and courts; most favored treatment for small and medium
businesses, especially in the manufacturing and agricultural sectors; tax
havens for developers of new technologies and innovative products; government
funding of municipal, transport, social and cultural infrastructure; and sufficient
budget outlays for education and healthcare.

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These demands have not yet
become eye-catching slogans in mass rallies. However, the political necessity
of these economic and social ingredients that make up democratic capitalism are
being realized by the middle class and may be next on the political agenda of
movements and parties striving to change the existing regime. So far, the wide
public discontent has been centered on such out-and-out abuses of
administrative power as falsifying election results.

But now this discontent is
expressed not only in connection with national elections. Strong protests
against the results of a mayoral election in Astrakhan
have shown that the demand for fair elections will be leverage for the
opposition in upcoming regional votes across Russia. The March of Millions planned
by the opposition for May 6 will also include demands for human rights and the independence
of the judicial system. The majority of the Russian people see that more than
two decades of Putinism (including the four years of Medvedev’s presidency) have
not changed the country’s economic and social situation for the better.

One of the first responses to
public demands for democratic changes was the reform of Russia’s political system by
dismantling parts of the vertical of power created by Putin during his second
presidential term. This reform involved a reduction in the number of members
required to form a political party and a return to direct election of
governors. Sensing the mood of their superiors, leaders of United Russia are
discuss ways to reform its political stance or rebranding its reputation as a
bunch of rubber stumping yes-men.

Additionally, the Kremlin
could not help addressing such a painful problem as corruption. Medvedev
initiated a draft bill to make government employees declare their purchases of
anything that exceeds three years worth of combined household income. Meanwhile,
Putin called the utilities sector highly corrupt and ordered state-owned
companies to end the practice of top executives benefiting from deals with
private contractors. Transparency of government purchases, proper governance of
state-owned companies as well as tight control of spending in educational,
healthcare and other budget-funded sectors are also focal points in the
tandem’s make-believe struggle with corruption. The reform of the Ministry of
the Interior, whose officers are often accused of abuses of law and corruption
is also designed to improve the image of the regime in public eyes.

There is no doubt that Putin
and his men would do their utmost to stay in power as long as possible and are
ready to offer any concession that would not tie their hands. Putin even hinted
that a new Russian government may include members of the opposition. A
coalition government or an ad hoc agreement of United Russia with another
parliamentary party may become the Putin-Medvedev tandem’s next maneuver. They
just can’t afford to lose their political clout and all that comes with it. The
fate of former Ukrainian Prime Minister Yulia Timoshenko – now jailed for abuse
of power and personal enrichment – is a too vivid example of what can happen to
a national leader when he fails to win political battles.

In this context, Alexei
Kudrin’s forecast that a new economic crisis could cause a change of political
power in Russia
should not be waived aside as simply wishful thinking. A repeat of the
financial crisis that shook the Russian economy in 2008-2009 would compel the
majority of the Russian people to condemn Putinism. The problem is what comes
next. So far, the liberal political movements and parties have not yet composed
a common political platform to win wide popular support for building a
democratic capitalist system. Boris Titov of Delovaya Rossia for instance,
believes that if new elections were called, most Russians will vote for the
Communists.

Thus the current political
discontent in Russia
is growing in a situation when there is no unity among liberal politicians that
could offer a comprehensive alternative to economic and social policies of the
state-oligarchy’s power system. Social turmoil brought about by a new economic
crisis may break this system, but would not necessarily result in the election
of leaders interested in building democratic capitalism in Russia.